Federal courts and Justice Department antitrusters are working together to narrow one of the major exceptions to the antitrust laws. The result is that when companies get together to lobby for laws, regulations, and administrative decisions that will affect competition, the authorities are going to take a sharp look at their motivations.
Most antitrusters believe implicitly in the oft-quoted observation of Adam Smith that "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Trade associations and industry-wide new product shows are not illegal, but there are precise rules on how they should be run to ensure they won't inhibit competition.
One kind of joint activity, however, can be unequivocally aimed at stifling competition -- campaigns, say, to convince a state legislature to pass laws that will favor companies already in a market over newcomers, or to get federal officials to stem imports of low-priced foreign mechandise. The U.S. Supreme Court made clear in a pair of decisions in 1961 and 1965 that such actions are okay, regardless of the strictures of the Sherman Act. The justices approved efforts by the railroads to get statutes that made it more difficult for truck lines to compete for freight business and, in the later decision, allowed pressures by the United Mine Workers to get higher minimum wage rates mandated for some non-union coal mines. The rationale for what has become known (after the original plaintiffs in the two cases) as the Noerr-Pennington doctrine: the Constitution gives everyone the right to petition the government and to try to influence legislators and decision-makers. That guarantee overrides the laws intended to establish fair rules of business competition.
But companies have been getting increasing notice that the protection extends only to lobbying efforts that are really intended to persuade lawmakers and bureaucrats, and that corporate officials have reason to believe will succeed.
For instance, the Justice Department recently looked into a situation where for years trade association officials of U.S. companies had been complaining in speeches that overseas companies were selling products in the States at unlawfully low prices. If it didn't stop, these speeches warned, the domestic industry would file anti-dumping charges. But while the warnings continued, the charges were never filed. The foreign producers, however, all raised their prices, giving American companies more maneuvering room to keep their market shares. When skeptical antitrusters began sifting through documents from the trade association, they found reports from consultants that suggested that an anti-dumping case had very little chance of success.
Even though the government lawyers decided that because of difficulties proving their case they would not prosecute in that instance, another industry might not get off as easily, insists Carl A. Cira Jr., assistant chief of the Foreign Commerce section of the Antitrust Division. "We are watching this general kind of behavior carefully," he recently told members of the World Trade Institute.
That point of view -- which is one of the few antitrust policies that the Reagan administration has carried over from the Carterites -- gets a lot of support from recent court decisions. The U.S. Court of Appeals in San Francisco in April gave the go-ahead to an antitrust case that Clipper Express, a freight forwarder, brought against 16 truck lines that fought before the Interstate Commerce Commission every effort by Clipper to offer commercial shippers lower rates. Clipper has made a case that the truckers' ICC protests "were spurious, baseless, and prosecuted without regard to their merit, intended only to delay competitive action, not to influence government action," explained Circuit Judge Arthur L. Alarcon, in ruling that the Noerr-Pennington doctrine did not apply. A key indicator of the truck lines' motives: none of their ICC protests were successful.
But not even success in using governmental processes to fight a competitor guarantees that the Noerr-Pennington protections will save a company later named in an antitrust suit. Earlier this year, the U.S. District Court in Seattle said the doctrine would not ensure that a shopping center developer could win an antitrust suit against him that called unlawful his attempts to block another developer by a barrage of state court suits -- even though the suits raised fundamental issues of zoning and were ultimately successful in the Washington Supreme Court. The issue, the federal court said in the antitrust case, is not the results of the suits, but why they were brought. There's reason to believe, the judge noted, that the goal was not to win the suit, but to tie up the developer and deplete his financial resources so he could not go through with the competing project.
The lesson is not to use suits or joint lobbying action against a competitor unless you have a good case and are serious about winning. Otherwise, the result may be an antitrust prosecution, without the constitutional protection given to legitimate petitioners to the government.